Date: Fri, 23 Jan 1998 19:33:54 -0500
Sender: Southeast Asia Discussion List <SEASIA-L@msu.edu>
From: Alex G Bardsley <bardsley@ACCESS.DIGEX.NET>
Subject: Fwd: IN: Dreams Tumble With the Rupiah (WashPost)
Dreams Tumble With the Rupiah: Indonesia's Workers Put Hopes for a Better Life on Hold
By Paul Blustein, in the Washington Post
23 January 1998, p. A29
KARANG ASEM, Indonesia - A 42-year-old laborer named Wares sat in his
ramshackle shop off the dirt road running through this village in
central Java and glumly pondered what the Asian financial crisis will
mean for his family.
"Up until now, most of my spare money was going to pay for my kid's
school," he explained, his mustachioed face clouding. "Now I don't
know what I'm going to do."
Last weekend, Wares -- who, like many Indonesians, uses only one name
-- lost his job as a construction worker building residential housing
in a nearby city. He figures he can eke out a living by doing odd
jobs, and his wife makes some money peddling snacks in a local market.
But the dream of giving his son a high school education -- which only
about one in five children receive -- may collapse because he won't
have enough to pay for tuition, uniforms and books.
In villages like Karang Asem, and in small towns and cities across
Indonesia, the nation's financial problems are starting to inflict
real pain on the people. And those hurt most are, like Wares, the
people who can least afford to lose.
For the past six months, the effects of the crisis have been
concentrated mostly in the ethereal world of financial markets.
Indonesian stock prices have tumbled and the nation's currency, the
rupiah, has lost more than 80 percent of its value against the U.S.
Now the crisis is moving into a new and potentially more explosive
phase as citizens of the world's fourth most populous country lose
their jobs and struggle with much higher prices for everyday goods
such as rice and cooking oil.
There are no exact figures for how many Indonesian workers have been
laid off, but authorities do not quarrel with estimates by labor
organizations that the number is approaching 1 million and rising
fast. Economic growth, which ran at a robust annual pace of 6 percent
to 7 percent over most of the past quarter-century, is officially
projected to fall to zero this year, with inflation soaring to 20
Even these bleak forecasts are viewed as too optimistic by private
analysts, because the massive flight of capital has left many
companies starved for the cash they need to keep operating.
Adding to the economic nightmare is a severe drought that has turned
rice fields brown and ruined crops in many parts of the country.
"Some people who lose their jobs will come back here and work as
farmers, but there isn't that much to farm in this area," said Pujo, a
neighbor of Wares in Karang Asem, whose farmers lament that it has
rained only three times in a rainy season that usually begins in
The multiple woes afflicting the country mean that safety valves
traditionally open to the dispossessed are being closed. Usually, when
a village is stricken by drought or some other disaster, residents
stream to the cities; and when times get hard in the cities, the flow
is reversed. But now, opportunities are dwindling everywhere,
including wealthier neighboring countries such as Malaysia, which is
having its own economic problems and is considering shipping home its
Indonesian guest workers.
Dennis de Tray, head of the World Bank's country program for
Indonesia, worries that many Indonesians are heading for desperate
times. "If the drought continues, which it appears to be doing, and
the financial crisis doesn't get better, which it doesn't appear to be
doing, it's going to be a very delicate period over the next six
months to a year," he said.
All of this adds up to a volatile social brew that helps explain why,
despite a widely hailed agreement on economic revisions announced Jan.
16 by President Suharto and the International Monetary Fund, investors
have remained skittish of the rupiah. The currency has fallen about 59
percent since last week's announcement.
In recent days, riots broke out in several towns in East Java as
townspeople looted shops they accused of charging excessive prices for
staple foods. Authorities are bracing for more violence. On Tuesday,
city officials in Jakarta were quoted in the local press declaring
their intention to strictly enforce a ban on Chinese New Year
celebrations because of fears that ostentatious displays by the
wealthy ethnic Chinese minority would spark violence by resentful
members of the Muslim majority.
The government, hoping to keep armies of the unemployed from gathering
in big cities, has offered special incentives for jobless people to
stay in their home villages when they visit their families for the
traditional end-of-Ramadan feast starting this coming weekend. The
national railway is selling one-way tickets home from Jakarta at a 70
percent discount to people who have lost their jobs in the capital.
Up the mountain road from Karang Asem, in the village of Kemiri, a
worker named Marwanto, 27, had just returned a week ago -- not from
Jakarta, but from Kalimantan on the island of Borneo, where he worked
for two years in a plywood factory before being laid off along with
Marwanto hadn't heard of any jobs opening up, so he'll farm a little
on his family's land, he said, and live off money he saved from his
old job. But asked how long his savings will last, he grew morose and
put his head in his hands. "I don't know. Maybe it will last a month
-- if I eat with my family all the time," he replied.
Even in places not affected by drought, ordinary Indonesians are being
forced to tighten their belts.
Just off the main road in Puncak, a town south of Jakarta, about 15
ojek drivers -- young men who sell rides on their motorcycles -- were
sitting around a shelter trying to keep out of the broiling sun.
Muliyadi, 26, wearing a baseball cap emblazoned with "Cool Fun Basic,"
said that in the past couple of months, his average daily income has
fallen roughly by half, to around 5,000 rupiah -- only 40 cents at
current exchange rates.
"Since the price of everything is going up, people are walking instead
of taking ojek," he lamented, adding that he is having to forgo
favorite foods he was planning to buy for the end-of-Ramadan feast,
such as peanuts, which doubled in price recently.
Another member of the group, Acam, was laid off from a cleaning job a
month ago at one of Indonesia's many troubled banks. Now he is
scrambling to replace the wages he lost by raising a few vegetables
and hanging around with the ojek drivers in the hopes that he can
borrow one of their motorcycles and earn a little cash, since he
doesn't own one himself. At 40, he has four children to support --
and, he added proudly, three wives. "The economy might be weak, but
I'm still young," he said as his friends roared with laughter.
Most Indonesians are still working and have avoided suffering declines
in their wages, but a widespread, seemingly universal complaint is
that, suddenly, their money doesn't go nearly as far as it used to.
The price of rice -- which is eaten with almost every meal -- rose 26
percent last year, and cooking oil, which is widely used in most
homes, is up more than 100 percent in some areas. Reasons for price
increases vary by product, but for the most part, the problem stems
from a combination of the drought and the fall in the rupiah, which
has driven the cost of imported products sharply higher.
Electricity and gasoline bills are likely to surge as subsidies are
eliminated under the IMF agreement, although the fund allowed the
government to continue subsidizing kerosene for a number of months,
since that fuel is used extensively by the poor for cooking.
"My income is not rising, but the costs of a lot of things definitely
are," said Nanang Suriyadi, 30, a factory worker in Tegal, south of
A LOOK AT INDONESIA
Land: A sprawling archipelago, extending more than 3,000 miles along
the equator. About half of its 13,667 islands are inhabited; 60
percent of the people live on volcano-studded Java.
People: 204 million. Projected population: 240 million in 2010; 276
million in 2025. It is the fourth most populous country after China,
India and the United States. About 31 percent of the people live in
Life expectancy: male 62 years, female 66.
Adult literacy: 83%
Religion: 87% Muslim
Economy: President Suharto has run a tightly controlled government. He
has hemmed in the news media, has neutralized the opposition and has
been accused of human-rights violations. But Indonesia's economy has
thrived in the 1990s with growth rates of 6 percent to 8 percent and a
healthy trade surplus. In the past few months, however, the economy
has gone into steep decline as a result of mounting debts, corruption
and other problems.
Income: Per capita annual income: $3,090, adjusted to purchasing
power. Proportion of people living in poverty: 8%
SOURCES: World Almanac, World Bank, staff reports.
=A9 Copyright 1998 The Washington Post Company